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CONB'ID:m'liAL ContereDCe 1/647- A, OoDterence on National Defense, Held at the Executive Otfices of the lfhite House, May 30 , 1940, 12. 15 R. M.

Present : Advisory Commission to the Council on National Defense:

Edward R. St ettinius , J"r. Willi am Knudsen Chester c. DaTls Ralph Budd Leon Henderson Miss Harriet Elliott William H. McReynolds (Absent: Sidney Hillman)

Secretary MOrgenthau Secretary Woodring Attorney General "Jackson Secretary Ed~son Secretary Ickes Secretary Wallace Secretary Hopkins Director Smith (Absent: Secretary, Perkins)

-Senator Barkley Representative Rayburn

General Marshall Adwirsl Stark

Secretary Early GeneraL Watson Captain Callaghan

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'IHE PRESIDENT: This carries me back a long ways, twenty-three years, twenty-

frur years and the situation is a little bit like the World Wa:r; period

-but it differs also in a great many respects. In 1917 we undertook to

complete national mobilization. There had bee.n practically nothing

done before the sixth day of April when we actually went into the war.

We had no system, we had no plan and there was imposed on the country

rather slap- dash methods. The duty at organidng an: />J:rrr:f of between

four and ·1'1 ve million men, and almost doubling the size of the Navy, and . -

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396 there waa n olved t:rom lt a syat em which on the whole worked fair~ well

but waa very weak ln a great many other particulars.

We paid very l1 ttls attention in those days to certain economlc

factors. Well, tor example , in the spring of 1917, because of the two

previous years when we were not 111 the war but theretofore, a very

vicious spiral had begun, l n tact it had got so tar u.nder way that lt

was pr actically impossible to check it. It related to all klllds ot

things that people buy and lt upset very greatly the whole scale of

wages , methods or eiJlPlOyment and everything else. -Just tor example, before we got into the war wheat was selling for

~dollars a bushel. Well, that affected every family in the United

States . It is a perfectly absurd price, or course , because the wheat

f'armers at that time were perfectly capabl e ot making a good living

with wheat selling at , say, a dollar and a quarter, just halt or 111hat

it actually was selling a t . Cotton was up around 30 cents a pound and

the whole life or the South was completely changed. The colored field

hand, because of the price of cotton, the tenant farmer , was buying

silk shirts. It was not just the worker in the factories . The negro

field hands were buying silk shirts. Right, Henry (indicating Secre­

tary Wallace) ? It was a terrible situation.

Copper, which at the begillning of the war had been selling at a

nice profit, around 9 , 10 or ll cents, was up to 28 cents a pound, 'Ihe ,.

result was that t he copper miner was getting 15 and 20 dollars a day,

-~d, a s f ast as t he cost or living went up, labor demanded, I suppose

rightly, a higher wage. And the economics or that period became fan-

tastic. Nothing had been thought out on those lines, That is the reason

that we have added to this Commission or seven, we put on th.is Coamis-

sion of' seven, certain people who will have the duty or trying to keep

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397 the economic leTel as constant as it is posaib~e to keep it.

We haTe, for instance, Ml.ss Elliott, who is going to -- who has

a lot or experience on consumer protection , and Miss Elli ott ' s -- I

am starting down at the bottom of the list, in a sense , things like

price control at the bottom because that is a t hing that streets,

ult1lllately, production, but in the first instance, it affects the liTes

/? • :.~<,, of t he people ot this .country. There won' t be very J!Dloh work for Miss

Elliott to do , except i n tile beginning, except to get trom the different

departments all of the daily and weekly figures from all OTer the

country on what the cos t of the consumer goods i s to the consumer eJld

to stop , before anything gets t oo tar out of line, a shortage, an in-

crease of pri ce that ought not to be justified, and keep in constant

t ouch with the fi gures.

I do not belieTe that there is an awful lot of Goverll!llent action

that is needed at the present time, We haTe got surpluses in almost

everything. The shelves are still pretty well stocked, the retail

shelves ell oTsr the country , but it is something we have got to watch

like a hawk to keep it from getting out of line, Now, that is Miss

Elliott' s j ob .

In t he ~e way , Mr. Leon Henderson' s job is price stabilization

in wh~;t might be called the non-consumer goods in their raw state~

copper and cotton and wheat and steel biLlets , et cetera and eo on.

We haven' t got lllllCh of a problem at the present time because those

articles today are not selling out of line but they may, and he has

got to watch that like a hawk to see t hat they do not s~ll out of li~e .

In the same way, in the same general subject, l!r. Darts will

handle the end of it on an over-all basis and 11111 try

to keep t product• in line w1 th t he general economy and see to it a t

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398 least that the farmer gets, during this ocm1 ng per iod, aa llllOh a pro-

portion ror his money, tor the continuati on or his l i r e, as other people

are getting. The Secretary of Agriculture, who i s here, will say, "We

ought to get a little more because the farmer ie still out of line. ft He

i s . We have bad .this theory or parity now tor a great nany years ; both

political parties have -t;ried to bring the farmer up to what is known as

ftpari ty," which means essentil!lly that we have taken an old period,

1906, 1910, in there, where the ratio that the farmer was getting, by

way or his share of the national income, was in those days a good deal

higher than it is at the present time. We have got to bear in mind

that it is the Govel'IU!lS_nt objective, not partisan in any way because

all parties have agreed on it, we have tried to get the farmer as close

up to parity with the industrial worker , the minute man, et cetera, as

it is possible to do.

Well, that will be, roughly, the job of Mr. Davis, working in very

close touch with the Department of Agriculture.

Then we come to - - let us see -- now we come to another phase,

which is not immedia te, and that is Mr. Ralph Budd's job of adviser on

transportation., I suppose the easiest way is to tell you what happened:

Last August, I think it was, realizing that something like this might

happen, I asked tr.r . Willard, who is a very old friend of mine , who ran

the railroads during the war for the Government, to come down here and

tell me what sort of a setup be thought we could put into effect, and he

said he though~ it depends entirely on whether the railroads are going

to be taken over by the Oove~t or not. I said that would be the

last possible resort; I don't want to set up a system by which the

Government would have to take over the railroads. '!hen Mr. Willard

said, "I think the railroads are in much better shape than they were

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399 1n 1917.• He said , "I elso laloW tbat enry r ailroad president in the

United States , and general: liii!.Ilager , '118llts to m ke a suooes s . or traupor-

tat i on i n oase of a crisis , a national emer gency or war, realizing t hat,

by gosh, if they don't, the rai lroads will be taken oYer by t he Govern- ,

ment. " Says Mr. Willard , "And eYery railroad presi dent knows the OOYern-

ment the next time will neYer hand them baok. " "Well," .{, said , "I

think that is a pretty SO<ld line. • And I t hink t hat Mr. Willard was

'absolutely correct.

So I got hold of -- oh, I as.ked Mr. Willard what kind of a setup he

would create ana he outlined a setup wbi oh be put into the form or en

illustration. He said, "I would l i ke to haYe one room w1 t h a double

desk in it. I would like to haYe the Goverll!D8nt man on one side of the

desk and "the r epresentative of the railroads on the other side or tba

desk. I'd like to have Ralph Budd on one side of the desk as the

Government man, and John Pelley on the other side as the representatiYe

of the railways. " So I talked to Ralph Budd and I asked John Pelley and

this particular setup 1qas ell arranged -- when was it , last August or

September?

MR. RP.LPH BUDD: Septeneer .

'!HE PRESID:ENT: All right. Well , all I had to do was to get on the tale-

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phone. Ralph Budd turns up and here he i s .

The idea 1s , and this will come later on, nO't now, a s a necessity

for the Arley , the Navy or air work, Mr. Stettinius ' work on raw mat~rials

1\ll. kinds of materiels just short of the finished product , and Mr.

Knudsen ' s work on the finished product, the moving of the materi al from

the mine to the Lake carrier, to the steel mill , to t he finishing mill,

to the airplane engine plant and, when tha t is completed, out, delivery

to the ./j;rmy or the Nayy.

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400 Now, as a matter ot tact, to carry this out the theo%'7 1a that

everybody concerned with production, even down to the last , will keep

Mr. Budd, as the Goverwnent man, in touch w1 th the needs for r ailroad

oars aDi Mississippi barges aDd canal boats , coastwise shipping and \

everything else because transportation mea.ns eTery form. Oh, yes , buues

and trucks, too, Thai is a very important lactor. We did not have them

in the World War much. Mr. Budd will get this advance notice of when

shipments are to be made, he will pa.ss a slip across the desk to John

Pelley, Is t hat right, Ralph?

MR. BUDD: Yes,

'!HE ~IDENT : Alld John Pelley will see to it that there is no bottleneck

on the railroads , w1 t h the certain knowledge -- he is telling the pal'-

ticular railroads i nvolved , "Re~IEmber, if you do not clear this bottle-

neck, if you do not clear this stuff, t he Government will take you over. "

{Laughter) And we think it is going to work awtul.ly well. Now, as a

matter of ! act, a t t he present time there is no transportation problem,

absolutely none.

MR. BUDD: No.

THE PRESIDEN:r: But if t his thing gets worse, t here will be, so Mr. Budd's

primary j ob a t t he present t i me is to get the machinery all ready in

case there i s a 1111ch heavi ':r demand on transportation fao1li ties than

exists today, so t hat he can put t his clearance mchinery at work' on

pressing the button. '

And, ot course, it means also that Mr. Budd will take up with the

different railroads the problem of additional railroad equipment, either

new equipment or the further repair of old·· equipment •

'lben we come down to employment. llofr, Billman is not here today

beca use he has got a bad case of flu. He will be here on Monday. All I

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said to the Press, orr tbe record the d87 before yesterd87, Mr. H111men

• is a very old frieDd or mine and he occupies the psychological position

.. of being e~ctly halt way between John Lewis aDd Bill Green. (Laughter)

You know him, do you not?

MR. S'fl!:'l'l'INIUS: Yes.

'IRE PRESIDENT: A good man to work with; very quiet, sensible and, I th1Jilc ,

as good a man as we can get. But his problem is not Just a problem or

union labor. His problem is going to be primarily Employment in the ··

widest sense or the term.

Now, as I sa~d to Mr. Knudsen before you came in, a part or this

general eoonoJey is going to save the Nation· money if we can out down on

relief, Relief is costing us a billion doll ars, a billion and a half

dollars, and it is costing the states and counties and cities another

very, very large sum and I want to -save money at one end, all I can by

cutting down and using that saving to pay, in part, for the munition.s

that we have to order.

Senator Barkley is here and Congressman Rayburn, the Majority

Lea\ier in the Rouse. Ttlat does not mean that I am not going to ask

for the full appropri ation of a billion dollars (tor relief) to last

until the first of February. Tllat has gone through the Rouse already

and is now before the Senate because I think we ought to have the avail-

able fuDds in case we need them. I hope with the pickup that a great ~

many people on relief can be given employment but it is not a certainty

yet.

Mr. H1Jlmen will also have general charge of the personnel training

in noncombatant work. Now, t hat means using, building up a great IIliUly

• existing agencies of the Government. It means that we a re putting in,

,. I hope -- mind you , a good many of these laws have not finally passed ; '\

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most ot them have paased one House or the other -- we are proposiug~ to ·

put i nto the ceo camps noncombatant t r ain1118o

Well, I will illustrate: One ot the great needs i s the need t ar

coo1ca. Now, that sounds silly. We need 10 or 115 thousand ooo1ca, mill-

tary and naval camp cooks. We haven't got enoush mal.e cooks 1n the

United States . We have got to train them; that is noncombatant work.

We have got to train a lot more people to be radio mechanics and radio

operators . We have not got near enough. That is noncombatant work.

We have got to train automobile mechanics 111ho would not be m111-

tari zed but we need more automobile mechanics tor ground work, tor gar-

ages and all those things, I am not tall;ing about eut0111Qb1le produc-

don. I em talking ebou t the repair gangs that go w1 th a very large

mobilization -- .A:rmy and Navy, The COC will be used for. that .

Secretary Hopkins, in the last three weeks, has been handling the

personnel angle of this whole program end we have already sent to Con-

gresa-·a deficiency estimate of $32,000 ,000 on that end of it .

Then, we will uee the NYA, the National Youth Administration, which

already is doing a very large training, vocational training of mechanics,

et cetera and eo on. It i s the elementary part of it, at leaet it is

something to build on, and they will continue that end of the work, the

NYA. Then, the CJl_f\., the Civil Aeronautics Authority, is going ahead

with the base training of fliers. This year that organization is turn-

ing out 1.0 ,000 boys who have had the base course and this coming -

from now on they axe going to expand the same system, which is running

very well - - in other words, I do not like to start a new organization

if you have got something you can build on -- end with the help ot a

very distinguished civilian colliDi ttse they··are going to t ry to train

50,000 pilots in the bass course.

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Now, from this ei rtlian t raining, f r om a good part o:r 1 t, t heae

boys and some girls, I hope -- goi ng to put t hem i n U' we can -- will

graduate to wbat might be called the post graduate courses. On the raw

materials -- not the rew materials but the ~inished material end or

things -- some o:r them will graduate into steel produ.ction. others will

graduate into the finished product, automobile pr~uction, airplane

production, gun plants, and some of them will graduate into the A.r1Jq

and Navy. Some of these fliers and pilots and some of the mechanics

will go to the post graduate· schools that are run by the A.rrJq , San An-

tonio and several other places , and

Then we come ~e -~o other ,

the Navy down at ~ensacola.

the two other "sections , " I suppose

is a good word for ·· i t , beginn1 ng at the bottom and , mind you, probably,

as I said before, consumer protection, transportation, stabiliza~ion and

farm products will require rel a tively, and at this time comparatively

small staffs; it is a coordinating job, it is largely a statistical job,

so you will know just where t he information stands at any time. The

emJ;>lOyment section will be a good deal bigger, necessarily, and the

other tlvo, industrial lll9.terials and industrial production will have to

be pretty large sections.

Mr. Stettin.ius w.ill hSlldle all of the materials , as I illustrated ,

from the _mine up to the unfillished steel shaft for a destroyer or the

engine block , and then it vdll be taken over on the production end by

Mr. 'Knudsen ' s division.

I said to fAt-. Knudsen this morning that this is a coordinating job

in a way but, at the same time it is' a good.,-deal more than that. It is

getting things done •

Now, to go back Slld illustrate the Government relationships to this

Commission.:

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404 You who are in private business know, I think, that the Gonrllll*l1t

has all ldnds of safeguards that haTe been built up over a period ot

years so as to preTent the stealing of money by GoTernment employees and

it ha s worked awt'!llll' well. In addition to that they put in the C1Til

Serrtce fifty, sixty years ago, and we want, especially when we are not

at war -- we don't want to break down Civil Serrtce or the safeguards.

You have to go through a lot more paper work than you 110uld in a private

corporation. You have to, because of the enormous size of the Govarn-

ment's business-- $9,000,000,000 this year; it is a big business --

you have to coordina te with a lot more groups than you do in any private

industrial company, because they do so many more things, the Gover:oment

does. hnd on that end of it, you know, I have appointed the best

quali f ied men I know of, who have been in the Government for a long,

long time, and Mr. h~Reynolds as secretary to you gentlemen.

If you want to know about Government methods -- even people who

have been here in the Government, specializ;ing on one thing, they have

got a lot to learn. Leon Henderson will have to learn a lot from Mac

(Mr. McReynolds). So will Ches ter Davis, he will have to learn a lot

from l~c because, when you are on one particular kind of work for the

Government you don 1 t know very much a bout vmat is going on in the others.

When I was Assistant Secretary of the Navy I hadn't the foggiest idea of

how the Department of Agriculture was run. I have learned that in the

l ast ei ght years from Henry Wallace.

So Mr. McReynolds, w1 th his secretarial staff, will act as a clear-

inghouse to help you in shortening, cutting red t ape and shortening

the delays t ha t ordinarily, quite frankly, go, with Government business.

And be i s very good at cutting corners.

And t hen you will run into another question which you can always

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405 handle through Mao IID4 that ie the queet1011 ot leplltJ about this,

that or the other thill6• That is wq I ulced the Attol'Zl8J' O..ral to

c0111e in aJ. though he is not on this so-called Council ot National Defense,

e.D4 neither 1s the Secretary ot the Treasury, and neither is the D1_reotor

ot the Budget. But there e.re certain things you will want into~t1on

about as to legali tr, whether you can do this or can • t do it, and through

the secretary you will be able to get, I can assure you, a quick juds-

mant, enn though it is a snap judgment trom t~e Attorney General, with-

out delay.

When it comes to a question ot finances, you can take it up, e1 ther

directly or through Mac, with the Director ot the ~get, Harold Smith,

or the Secretary of t he Treasury. In other words, I think we have got

the mchinery that will save everybody time and work in together.

'lhen on another phase, your relationship to the A:.r:Ir1f and Nay:y -

that is very, very important.

'lhe final determination of the eharacter of Ar~ and Navy materiel

ha.s to be made by the people who know best about it, in otber woros

·the S~;~oretary ot VI!U', the Secretary of Navy, Chief of Staff of the A:rray .

and Chief of Operations ot the Navy, and we civilians have to be bound --

and the Congress-- in effect, by what they say they need tor military

operations. We haTe always done it that way, w1 th certain exceptions

lllhare an 1mportant conmi ttee of the Senate soes twice up to the proving

grounds to see a crackpot inventor set ott an explosiTe that does n'Ot

work. Cit' course if the members of the Senate want to go up and see

pyrotechnics of that kind, it is entirely up to the Senate. Am I right ,

.Alban?

Sl!NATOR BARKLEY: I t hink so, yes.

'lHE PRESIDOO': But, in the last analysis , the A:J:rrr:r and Nayy officers and

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406 h•"• ot their 4epa1'1111ents han sot to 4etftldne the •84s llD4 the

character ot the u84e. All4 80!118t1 ... the7 Jake awtul lld.stakes. I was

talldug to Mr. JQIUdsen this mOl"lling. ODe ot the first times I n'er saw

h1m was up in Detroit,, durill8 the war. I thiDlc it was the IIUIIIII81' ot

1918. '!he Na..,. bad decided t .bat th117 We.Jlted more IIIUIS production in

ships and so somebody made the terrible lld.stalce, not ot girlng the job .....

to Lh'. Ford but ot designing a ship that was co~~;>letely unsare e.lld which,

it you turned too short or too tastj would tip ov~~r . It was called the

Eagle boat and Lh'. Knudsen did a pertectly gre.Jld job in turnill8 them out --

couldn' t have been ill;)roved on. But the design was awtul. It is the

easiest wa:y of tell i ng that story. We have been trying to get rid ot

them ever since.

MR. KNODSEN: '!hat wasn't up to us, Lh' . Preeidant . (Laughter)

'lHE PRESIDENT: No, the design was entirely the fault ot the Navy Departmant .

We have to admit it • . However,. taking it by and large, t he A:rriiy and Navy

do know more about these designs than 8liY ot us aDd we have to depend

on what they tell us . Now, when you come down to this work, either of

the materials section or the production section, it falls really into

three jobs : The first is requirements. You have to know what the re-

quirementa are. 'l'ben you have to put t hem on the schedule . It is a

question or priori ties. 'l'bat comes into that, and speed. And then, the

third is deliveries.

Now, you won't have - it will be up to you entirely -- you won't

have any trouble when you get these things to the schedule sta~j:e, be­

cause, atter all , that is your business. If you can once get the thing

scheduled and under way, then' with your inspection aDd follow-up, you

can get your deliv~~ries. But , I said this morning, you are goiug to

~J have 'io little trouble in the beg_inning in getting your requiremcta

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'nle t otal ot this program ill goiJ18 to be approximatel,y _.,000,000,000.

'nle reeular ~ and NaYf Appropr.iation Billa , which ware l arpr this

tiscal yaar, carried a total ot about $2 10001 0001000. ot course that

did includs pay ot the Arar:f and NaYf and tood tor the ~ and NaYf and

clothing tor ths Arar:1 and NaYf. But than, some ot these other appro-

priations include the same item.e. On top ot that, another billion

dollar s I have already asked tor, and a :fourth billion dollars that will

go up to Congress tomorr<m tor- the Arar:1 and Navy. Out ot the total ot that tour billion dollars -- I don't know-- I haTe not bad broken down

the amount t~t goes to pay and rood -- have you aey idea on t hat , I

George , General?

GENERAL MI\RSHA.LL: I do not know; the earnings (?) end closely allied products

alone will run up to about $700, 000 ,000.

'!HE PRESIDENT: Yes . So the :first job is to E1> through with the requirements

and make the ~ and Navy agree exactly what those requirements are.

Now, there are a lot ot kinks to be ironed out , a great many, especially

on a1ror a:ft engines. And, during t he past three weeks, because we did

not have t h is Comadssion, the Secretary ot the Treasury has been acting

as a sort of clearinghouse, because be had been acti.ng as a clearine-

house beforehand on the allied purchases , so 1 t was logical be would

act .as a clearinghouse on the procurement ot engines end planes. So he

will work -- that, ot course, is a fini shed product -- with Mr. Knudsen. He will tell h1l!l exactly what has been done up to now. He will tall

about our efforts to simpllty-.

The Arar:1 had twelve or fourteen training types ot engines; the

Navy bad tour or five. 'lbe reason tor that was a perfectly natural one:

'Ihe A:l'l1r:l wanted to keep ths 11 ttle plants going during t he past couple

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#M7•A- U

408 ot 7eara. ~ey wanted to keep the in production ell4 therefore aooapted

ellginea that were of a aligbtly different type and planes that ware of

a alightl.J different type. But our thought as of tod.q is that we •

' should simplify and get down to ae few different types Of planes and

engines as it is possible to do.

~en, as I s.q, on that end of it Mr. Morgenthau and Mr. lOUldsen

will exchange, views and YO)l wil). get trom h1m nerything that baa been ·-·

done up to date on that line. ~e same way with mchine tools, which

is very, very important. We have done some prel11111nary spade work but

that part is not straightened out entirely yet.

Then, there is another phase, just to illustrate what we have been

doing, and that relates to certain of what they call critical raw

materials and that falls into Ed Stettinius• field. Starting three

weeks ago, I turned that over, because there were so many departments

interested in it, to Harry Hopkins and he has got that in very good.

shape.

· '!here are, roughly -- what are there, Harry, twelve?

MR. HOPKINS: There are fif'teen of them.

THE PRESIDENI': There are now fifteen critical raw materials.·· Now, of course,

if you read some columnists, you would say t~~s country is going to f'old

up if you did not have a three-years• supply of all these materials on

hand.

The problem is lim!lr simpler. out of' !ifteen different things,

twelve of them are very small, both in volume and price, and there is

bef'ore the Senate and House today, in two different - three different

four dif'ferent bills, a total of $60,000,000 for the purchase of these

raw materials. Well, there are things, for instance like three IDillion

dollars' worth of (!Uinine for the A:trrJi and Navy and Public Health Service

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#647- A -- 115

409 because we haven't got a ~ig enougb etock of that. That comes almost • entirely from the Dutch Illdies. We are trying to buy i t DOW tbrougb the

Procurement Offi ce aDd we hope to get i n under the wire before the laps

or the Germane talce them.

Alld then there is an item in there tor mercury. We have not got

enougb mercury in this countcy in storage. 'Ihere i s an item of tour or

/' f1Te million dollars tor chromium - - things at that kind , aJ.l rela ti veJ.y

sma.l.l.

'!bose are being handled, t hose twelve items, that comparativelr

small total of $60,000,000, by the regular Procurement Service of t he

Government, to which was appoint ed yesterday Mr. Nelson ot sears Roebuck,

to the head of it . And , mind you , a great mADy ot all these articles

that are needed by the A:J:my and Navy, a large portion of the purchases

vli~l ac~y be done througb the regular Procurement office, which is

buying -- I don' t know what -- three or tour billion dollars• worth or

goods of various kinds evecy year.

Then that leaves you three critical r aw materials -- tin, rubber

and manganese .

Well, let us take the case of manganese: I don ' t think the steel

people are vecy a:uch worried about that problem. We are getting most

ot our mnngellese from the Stra1 ts Settlements at the present time be- .-cause it i s the cheapest place to buy. There i s some in Brazil end

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there is a lot of higb- class ma.nganese in the United States. Now, we

can't ask the steel COII!Panies to lay in a large stock of manganese at ~

a very high price. They now have somewhere around six month.s' supply

on hand.

I MR. STE'l"fiNIUS: Si x months on rubber.

THE PRESIDENT: Is that it?

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#M7- A - 16

410 MR. STE'l'nNitJSs Two years on liaDgallese •

• 'mE FID'SID:Jtrrs You see, IDI1IIg8IIese is not a very serious problem, but we are

going to set up e. corporation, a Government corporati on, and lend 1 t

the money through the RFC , and try to get a little mare manganese in

storage in t his country.

At the same time , through Stett1n1us' organization, he has got to .

have a study mde ot how long, in case we get into a long war, bow long

it would take to p,ut our own manganese mines into operation --

MR. STE'l'l'INIUS (interposing) : Right.

mE PRESrDENT: - - and be ready to give an order and have those mines in opera-

tion by the .time the storage supply gave out.

The next item, rubber, there again nearly all of tlla t comes from

the _IJutcb Indies and lllBY be cut· oft by water, and we have_ got only a

six-months' supply and you cannot blame the tire manufacturers because

rubber is selling at a pretty high price and t hey don ' t want to get

stuck w1 tb an enormous supply and then suddenly have the price cut in

half. So we are going to finance that t hrough Jesse Jones and have a

corporation to buy the rubber and get it here, if it is possible to get

it here, from the East Indies and crea te, in effect, a re-volving supply

of rubber, which will be turned over to the rubber manufacturers. To

put it another way, we guarantee them against a loss on their cnm raw

materials,

So that setup is ready to go as soon a s the bill goes through giv-

ing Jesse Jones the right to organize those three corporations.

Did that go through the Senate yesterday, Alben?

REPRESENTATIVE RAYBURN: The Hause Committee reported it yesterday.

• sm4.TOR B~: . nw.t bas been reported out of coiiiiDittee •

i!m PRESIDENT: So -- one ot her t hing: Stettiniue bas got to start i .n w1 th

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#M7-A- 17 411

the scientists beo!IUae we might be out ott entirely on mbber, 8114 we

han only got a six- months' supply on hand -- to produce in this country

rubber substitutes which can comb ,from the Ouana (?) -- some ldnd at a

• plant -- and I think it was Mr. Ford that proved i t could be Dlllde from

goldenrod at a much high.er cost and, ot course, it can be made synth~

tics.lly from oil residuum -- now, we ought to be ready, i n ca.ss we. get

cut · ofi' :rrom the supply of natural raw rubber that comes from Brazil but

mostly from the :East Indies -- to make our own home grown supply ot

rubber.

On the question of tin, it is very much the same situation. We have

a supply of tin on hand. I do not remmber what it is - - six or eight

months.

l.!R. STETl'IN!US: A year, sir.

'HIE PRESIDENT: 17e probably can get more out of scrap stocks in this country

than we are getting now, but still we have not got enough tin. That

comes from the Straits Settlements. It might be cut orr. There is still

another market, Bolivia, which is a higher cost market and that, because

of German aoti vi ties down there, might be cut off from us. That i s a

l1 ttle bit ot a difticul ty. Vie have no tin in this country and it is

largely a metallurgical question of trying to substitute for cartain

articles that have a tin base today -- to substitute other metals.

MR. STETI'INIUS: We have no tin refinery, which is just as important.

THE PRESIDENT: And we have no tin refinery e1 ther •

• So that part, these critical war materi als, I think we are pretty

well on top ot in purchasing all we can get now, but we have not yet

carried through the study of putting our own machinery at work to create

what the Germane would call "ersa tz" materials 8Jld supplies.

Now, it is rri:f thought that you will find, all of you, that ' the Arrtr:l._ "\

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Na-yy ~tiona Board has aYail able a pertectl7 grand mass at Mteriel

and I think that you shoul d, as a Commis s i on, hays cer t ainly a liaison

w1 t h the Arlo1- Navy Mun1 tione Board, through some member ot that Board, ...

an Arrrq officer and a Naval officer , or that you may want more than

that. On some of these sections perhaps Mr. IO:Iudsen ought to hav e , on

the production end, two people from the ~tiona Board and Mr. stettinius

on ~s end ought to have two people trom the Mun1 tiona Board. Some or

the others won' t want any -- Chester Davis , on the agricultural end,

probably won't need anybody from the M.lni tiona Board, and on the two

pr ice sections, I don't tl'>J.nk you will need anybody from the ~.WU tiona

Board becattse you •11ll be keepi11g in touch with the proposed ~rders when they hav~ been decided on, in other words when you get past the

requiremsnts stage .

ILR. HEND1!RSON: I have a certain knowledge or what they have been doing over

a period of time.

nrE PRESIDEm': Yes and you (turning to General Marsha ll) have got plenty

of people that knovr that arrangement?

GENER.'\L M4.RSHALL: We can a rrange that very simply.

'IHE PRESIDENT: Now, just one word -- m;y Lord , I seem to have talked an

' awfUlly long time - - one word about the present situa tion. I will tell

you all tha t I know in the international s~ tuation in a very few words:

It is extremely serious tor England and Fre.nce. VIe are not saying

so out loud because we do not we.nt to 1a time.te in this country that

England and France have gone. It would hurt their morale terribly if

we mention i t out loud, but it l ooks very serious.

The GermeJ1 personnel and Germ8J1 materiel is so intin1 tely l,arger -­

I do not say superior in etfici ency but so intini tely larger -- than

the combined personnel and materi el or England end France that , just on

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the doctrine of cllanoe, they will win.

It maana two possibiliti es, if and when that happens - i t happens

wi til the aid of all the resources of Italy because it looks tod~ as if

they will come in somewhere, sometime in the next two weeks , 1J18Ybe next

w~, maybe the week after , but i t is reasonably certain that Italy will

come in. '!bat will mean the complete dominetion of ».!rope by the Nazi

forces, with the Fasci sts acting as their lieutenants. It will maan the

complete domination of Af'rica, which is wholly owned by ».u-opean nat1oll.ll ,

and a very definite desire on the part of the people who run Gel'lDall;1 to

destroy the power of the British Empire and England especially.

I t does not mean of necessity that they will be coming over here

but it means possibly that they would set up an economic union, a tariff

union, which t hey would control entirely and then s~ to the people (

outside , "Yes, you can join that tariff union on our terms." '!bey could

s~ very readily to nations where they have a large infiltration, like

South America, they could very well say, tor example to the Argentine,

"If you will join our economic ».u-opean union, we will take all of yoor

meat , your whea t and your corn, on which, the export of which you live

on. We will take them on our terms; we will guarantee to take them.

We will y~ for them but there is no such thing as foreigll exchange in

the old sense, based on gold or anything 'like that, so we will pay you

in goods which we will decide on. We 1J18Y send you steel rails from

Belgium, which is part of our tariff union, production union. We III8Y

send you toys or steel trom Germany; we 1J18Y sand you knives from

Sheffield, England, because we dominate the entire econO!l\1 of England ,

Scotland and Wales. And i:f' you don't want to take it , it you don • t

want to join this union of ours, you don ' t hav e to."

o:r course t hat puts it squarely up to the Argentine, which has a

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very large Oermen population already. It they do not accept, there is

no pla ce else in the world where they can sell their beet, corn and

wheat. Stucki That is one or the things we have got to taos • • That will be a peacefUl process in the sense that the Germans and

Italians send no IU'III8d forces over to our hemisphere. It will mean they

will make no attempt or effort to take .possession ot Canada or the .• British West ' Indies or the French West Indies. Therefore , technically0

they would not be violating the Monroe Doctrin.e and, through a peaoetul

precess of control, they would, in effect, dominate all or South Ame~ica , . -. Central .llmerica maybe, and they might even ask us to join the customs

union. I can see a picture of what would happen in this country it they

said to the South, "VIe will take all your surpl~~-cotton, take 6,000,000,

bales of your cotton and we will pay you in steel rails or we will pay

you in cheap German automobiles. " Of course it would. mean a complete

revolution of thought , political thought, economic thought in this

country as to whether we will reta in the tariffs and keep the equivalent

of s,ooo ,oco,OOO bales of cotton, translated into. terms of automobiles

or steel rails or anything else , whether we will a ccept that and go on

a strai ght barter basis of export and import or whether we would retain

our. present methods. And I think t he country would be split right

across the middle on it and I don't know wha t t he circumstances would

be or what the answer would be.

On t he other hand, a victor of that kind may think at the begiiiJling

that he is not goi.ng to conquer the whole world but, when the time comes

and he has conquered Europe and Africa and got Asi a all settled up w1 th

J apan and ha s some kind of a practical agreement w1 th Rtlss ia, it may be .

human nature for victors of tha t kind to say, "I have taken two-thirds · ..... . .

of t he world and I am a ll armed and ready t o go, why shouldn ' t I go t he

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whole hog and control, in a. 111111 tary way, the last third of the world, I

the Americas'?" And there is no one of us can guess defi:ni tely a s to •

what will be t he decis i on on the part of Ger!JilD7 and Italy if thSJ co. <

pletely control all of ~ope, including the British !alee. We don't •

know. 1hat is the reason for t his program. It 1a because we don't know.

1hat is the primary reason. A good ID8JlY other victors and conqueror s

in the world have said , " I only want so much," and when they got t hat .. they said, "I wnnt only so much more ," and when they got that they said ,

"I want all the whole known world."

So there is the si-t;uation and that is what we have got to prepare

for .

One more t hought comes to me and that is this : that in all this

production wo~k, I think we have got to bear in mind not that we are

tilling an order. We have 'got to do more than that. We have got to

say to ourselves, all of us , "We a re tilling a specific order that is

given to us ' by the Congress of t he United States but, at the same time,

we are preparing all t he plans and, perhaps, even doing construction

work against the time when that particular sized order is going to be

doubled or trebled." In other words , on the question of -- wha t?

airplane engines, we may be a ble to get the engines ~1e want from exist-

ing plants but we have got to think ~f the possibility and , perhaps ,

prepare for it, where we may have to turn out i ntini tely more engines

than this partlc\ilar order calls for . That brings in a military considera­

tion. Nearly all, so many o~ plants are situated on the seaboard,

on the Eastern seaboard, some things on the Western seaboard am , trom

t he military angle , on additions to present production I think we are

all agreed t hat we want to put them in t he Middle West or the north part

of the tiliddle South, just for ordinary precautionary purposes.

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41 6 I do not t hi llk I ban got 8JIT1;h1ng el a e - - 1t you 1fll.l1t t o ulc

ques tions I will be del1gllted to answer t hem.

RKPR!Sml'ATIVE RAYBURNs WhG are you goi ng to s end th1e additions! est imate

up to the House?

, THE PRESi m:m' : Tomorrow morning, i f I CIIZl get through w.l. th the Arrrt:l and Navy.

I th1llk I can. What I 8Jil going to do, SaJII, is to send 1t up in r ather

general ter.ws , without giving, probably, ~ specirio tigure. The Arriq

estimates run around 700, 750 million dollars mor e , and they cannot

probably, of course, be apent , all of i t , in the coming f i scal year ,

and this thing will have t o be broken down by the Armlf before the Ap-pro-

priations Committees.

REPRESENTATIVE RII.YBURN: That won 1 t require any additional legisl ation like

we are passing t his week or last week - - this week on the Arm1 and Navy?

'!BE PRZSIDENT: I don 1 t know; how about ~bet?

GENERAL MARSlL\LL: Not for the Armlf, sir.

'.lJIE PRFSIDEm': You don ' t thi Ilk so?

GllNERAL MI\RSHAil. : No,

THE PRESIDENT: l.nd the Navy I haven 1 t seen yet,

REPRESENTATIVE RAYBURN: That ie the deficiency program?

'IHE PRESIDENT: Yes , · We want to eliminate, of course , from t he Arrrr:f end Navy

figures things that are all second and third priority, I want to stick

' to t he first priority end it will take at least until the autumn,

probably November, before ·,;bose orders can possibly be let and I thillk,

as we all know on the doctrine of cbances , that if this world situati on

continues the Congress will be back here after election day.

SFNATOR BARJ<I.EY': What you are sending up tomorrow is in additi on to the

~1,182 ,000 ,000 asked for in the pending bill, and that is ei ther autbor-

ized or based on authorizations anticipated in t he pending bills , NaTal .J

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• 8l1d A:rrr!:f, whioh are now on the calendar in t he Senate aD4 House too?

'IKE PRESIDllNT: ADd, o,f cour se, you can authorize the oontr e.oting f or certain

sums which would mean that the greater part of the money would not come

out of the Treasury until a great deal later.

SENATOR BARKLEY: You spoke ot $4 , 000 0000 , 000 a while ago?

THE PRESIDENT: Yes, it will be about a billion more.

SENATOR BARKLEY: How is that broken down? You have got your $1,182, 000 , 000 --

'lKE PR!SIDENT (interposing): It is mostly on three or four related items ;

aircraft; aircraft guns to go on the aircraft, both A:rrtly and Navy; anti-

aircraft guns for both the Army and Navy; emnnm1t1on to go w1 th it ;

certain t hings l ike tanks, which run up to $90, 000 , 000, Those, I think,

are the principal items . It is guns, aJIIIIDlni tion, tanks and aircraft.

That is the bul k of it, and both services.

ADMIRAL STARK: Plus some Naval ships which are already authorized, if you

approve them.

MR. KNUDSEN : Y.r. President , may I ask a question?

THE PRESIDENT: Yes .

MR. KNUDSEN: In the physical setup of this Cormn:i ttee, is that Committee

charged with setting up the details of i t s own operation?

THE PRESIDENT: Yes .

MR. KNUDSEN: \'/here do we go finally, here?

'IHE PRESIDENT: No, Bill . Mac , what are you going to do?

MR. McREYNOLDS: The Federal Reserve Board has offered us quarters in their

• building •

TEE PRESIDENT: Good.

MR. Mc~OLDS: I f you will let _us go that far awe;~.

'IHE HrESIDENT: It is one of the most beautiful buildings in Washington and . ' directly opposite the .~and Navy buildings .

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SENAT(J{ BARKLEr: It is a very cold looking building •

'll!E PRESIDENT: Well , after these boys and eirls get into it, it won' t be

cold.

MR. HENDERSCJq: The best lunch in town -- better than the White House lunch.

nl:E PRESIDENT: Sure; I haven' t got any aircooling here.

MR. DAVIS: Does the Gollllli ttee have any other tunctions as a "!hole CODIDi tteet

'mE PRESIDENT: Except to coordinate your work.

SENATOR BARKLEY: I have been asked several questions about the status of this

' Commission. Of course the Act of August 28, 1916, is sti ll in effect,

provid1ng for the C9Unc1l on National Defense. During the World War

they 'created a War Industries Board , which was an offshoot of t hat .

'll!E PRESIDENT: It was an offshoot of the Counci l of National Defense in 1916.

SENA'roR B.~: Is this Commission of the same nature, that it is supposed

to operate in connection with or as an offshoot of the Council of National

Defense?

THE PRESIDmT: Of course the Council of National Defense i s one of those

paper things that is pure fiction because it contains si x members of the

Cabinet at the present time. It is essential that the Secretary of the

Treasury 9~ on that and the Attorney Generlil on that. 'lbs only two

• people who would be left ott would be the Secretary of State and the

Postmaster General who have nothing to do with thls end of the 'WOrk.

Now, obviously, we are not go1ng to have that Council of National De-

tense meet at all. It will meet as part of the Cabinet . But t hey will

be available to t hi s Colllllission a t all times in their r espective duties ,

in their dltferent departments.

SENA'roR BARKLEY: The question that has been a sked is under what Act --

~PRESIDENT (interposing) ; Under the Act of 1916 which set s up, f irst,

this Council ,qt National Defense , which is pure fictiop , and the Advisory

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• #M'I-A- 215

419 COllllliu1on to the Council ot National Deteue, Whioh 1s this b0\!7. AD4 1

when they were appointed originall,- 1n 1916 the,. were the ooor41DIIIt1118

body, just as this 1s, tor the whole works. ADd the Counoil 1tselt

never eat except in Cabinet.

Now, we are just repeating that and, a e I said the dey before yes-• I

terday to the Press and a s I said this morning, at the present stage

we are s till at peace, we are not at war.· We are not trying to raise

and equip between tour and five million men for the Arm:! and 1500 ,000

men tor the Nav:r -- we have .not reached that stage. \ . Now, it we should get into the war this particular Council is going

to have a great many more pr9blems that may require certain addi t1o11B.l.

machinery -- 11: we get into the war ourselves .

MR. KNUDSEN: Where do we head up at the moment?

'!BE PRl!SlDOO': At the moment you head up in the Federal Reserve Building and

Mr. McReynolds will start there - -

MR. KNUDSEN (interposing) : I beg your pardon; I meaD;, who i s wr boss?

(Laughter)

S PRESlDOO': Who is your boss? Well , I guess I am. (Laughter)

MR. KNODSEN: All right . (Laughter)

THE PRESIDENr: And I ha.ve asked Congress for a million dollars • appropriation

right away tor the Council.

As I . say, s ome of it will be very small in its starting. Two or

three, the employment and, the industrial production end , the industrial

materials end will require a very large staff and 1 t will be up to you

to pick your own statts.

When it caDSs down to clerical help , ot course I think we will not

have vary much trouble -- we are not bound by the CiVil Service.

MR. Yc~OLDS: Not on thi s appropriation. ¥

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16•'1-A- ae 420

mB PiuSID!RT: ADd, ot course, TOU will be able to get a certaill DUI!Iber at

people from GonrJUDent departments aDd bring the rest in.

MR. ST.!'I'l!INIUS: Would you refer to them as dollar-a- year men'

'lHE PR1!5IDEN'l': No, they will get paid.

MR. KNUDSEN: I woilld much prefer t hat they get paid.

MR. STE'ITINIUS: With a few exceptions: as tar aa we are concerned, we do

not oars.

THE PRESIDENT: Yes, and it i s a good thing you don ' t baTe to put them ill

uniform.

MR. HENDERSON: On this roe:xinmm compensation of $6 ,000 on tl:\ese employees ,

will it require oon1'imation?

MR. McREYNOLDS: No, not as it is drawn.

MR. HENDJmSC!l': On the basic Act, I will risk you a nickel that it dOes.

'Ihat is a big risk, !Ar. President, with Mac.

tm. McREYNOLDS: Make it a coos cola.

THE PRESIDENT: We ought not to, as a matter of f act, because we ru.n into all

kinds of difficulties -- it upsets the rest of t he OoveriiiiiBnt -- we ought

not to pay more t han ~10 ,000 because that is pr actically the top pay of

the heads of all commissions , all the others in Washington. That is a

sort of standard ~top lillli t and the standard top llm1 t of the House and

Senate too.

MR. !&:REYNOLDS: No, we cannot pay COJI!Peti tive prices against industry.

'IHE PRESIDllNT: One word: ot course we have t hi s fifth oolUIIID thing, which

is altoget her too widespread through the country. In the bringing in of

new people vte have got to be pretty darned caretul. Well, I will give

you an i llustration on fifth column: 'Ihe Secretary of Labor the other

day had reoOlllllended to her very, very highly, a teolinioal man wbo was ... ., pretty t horoughly familiar with the whole sub ject ot employment and she

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#M?·A- 8'1

421 1IU aoiq to ~point him. Lucldl7, she called up sCIII8boq 'ia tU J'eclera­

tion of Labor and ehe was warDed agaiDJJt h1lll. We tolland the thiq

down and found the part1oul.ar lllllJ1 she was 801118 to e,ppoint 1IU absolutely,

100 per cent affiliated and associated w1 th the (!omnl•n1st mov-nt in

this country. You have to be careful on that~ Also be careful not to

get pro-Qerman:s. 1bere are a good 1118J1Y .AmericaDJJ who lon efficiency

and are pr~Germans .for that reason. We even have them in the ranks or ..,

the officers of the A:rrq and Navy and we baTe to be pretty darned care-

tul about the inside, about the heart of the fellow we are getting, as

well as his head.

ATI'CimEY GENERAL J"ACKSON: If any employee or prospective employee is desired

to be investigated, we will get a very pranpt report from the ll'ed:e"ral

Bureau of Investigation·, as Mao knows. So far as that can be guarded

against, it can be g11arded againat by an investigation ot employees~

are com1ng in.

THE PRFSIDENT: 1bat is right, and the Department of J"ustice can carry rut

an investigation of that kind very quickly •.

' MR. HENDERSON: The Government departments utilize that now.

AT'roRNEY G:Em!:RAL J'ACKSON: Some do and some don't.

THE PRESIDENT: Some do and some don't. They don't all utilize it.

MR. BUDD: May I a sk one more question t o clarity the si :tuation? As I under­

stand it, each of us will set up such organization as he needs now and

enlarge it as the tu ture may require and, presumably he will function •

with as much or as little as he needs to function, only occasionally

coming together as a commission?

, , r'll!E PRESIDENT: I would do 1 t fairly often. Now, you. take on the question of

railroads. 1bere is an example. . I do not th111k we want to upset at the

present time the railroad scale of pay or the ra1lJ>oad employees or the· •,

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Now, it 1ou were to get fran one ot the brotherbooda, tor ez&DI)le,

the idea that perhapa fOU OUght to han a brotherhood lllaJl in with 1011 . , ae one o.t 10ur assistants - they are not dittioult people to work with--

and it anything comeJI up in regard to people Clll raill"oada, that is the

thing 1ou CQght to collBUl.t with Sidner H11111An on eo that his section

would know the problem ot employment in transportation as a whole. Now,

that is why' I think the eaTen of 10u ought to meet tairlf often.

MR. BUDD: tty th01J8hts coincided with that e:mctl1, sir, It so hjlppens that

in the mtt er ot railway labor -- I think I speak tor the entire indus-

tey -- we feel, just as you have said, that we wght not to make an1

changes now, '!here is mcbineey set up, ot course, which, when we are

not at war, goes ahead according to the legal provisions, On the oper-

sting end ot the t machinery, it just happens we have had noti ce ot a

desil"e to change -

THE PRESIDJ!NT (interposing): Yes.

MR. BUDD: -- and vre are answering in accordSllCe with the law. But our whole

attitude is that that ought not be be upset now, Perhaps your sugges-

tion that we get i,n touch w1 th Sidney Hillman on that particular thing

as soon as possible is a good one.

THE PRESIDENT: Dn that , just asaoother illustration, don ' t for get, on your

transportation as a whole, probably you ought to have eome 11aisou mn p • w1 th the Maritime Col11Diss1on. Just as Sidney HiJlmn would probably

want a liaison w1 th the !Aari time Labor Board , in the same W9.1 fOU

probably ought to have somebody, an assi stant, on the busses and trucks

end and on the canals and barge lines •

MISS ELLIOTT: l68yc,f ask one question 1n connection with the consumer problem?

AlJ I UnderstaD:t'it, you think there is an adequate supply now, tha t there

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164.'1-A- 89

423

mB PRISIDENT: I think that 1e so at the present time.

MISS ELLIOT'!': Then the major question here 1e watoh1116 out about prioest

THE PRESIDJ!N'l' : ADd 11Uppl1es •

Q. sUppose, far exau;>le, that through the GoTer:ument agenci es here it might

be indicated th.at prices were gettill6 out of line. Who has the authority

to do anythill6 about that?

THE FRESIDENT: You tell it to Chester Davis first and he takes it up with the

Secretary of Agriculture, you see, on agricultural things. That is --

MISS ELLIOT'!' (interposill8): Shoes?

'IHE PRESID~: Shoes? Well , I suppose shoes you Will take up with Mr.

Stettinius.

MR. S'IETTINIUS : Production i s shoes.

'IHE PRESIDENT : I guess shoes wout-d be production (Mr. Knudsen) . Hides , of

course the consumer does not buy. Shoes he does buy so you take that up

with Mr. Knudsen.

MISS ELLIO'IT: That would be the question. Perhaps my relationship would come

out in the meetings of t he Committee, as they coordinate.

'IHE .PRESID:ENT: Yes, so you could present your problem to other people on the

. OOI!IIIission.

ATTORNEY GENERAL J"ACKSON: I think thet problem, dealing with consumers • goods

and agriculture, they could keep in touch with the antitrust divi:sion of I

the Department of J"ustice , because there are -certain proceedings pending • and some conteuplated that affect that field.

THE PRESIDENT: Then you should have, also , possibly through the secretary's

office is t he easiest way , a liaison man w1 th the Procu;rement Offi cer of

the Government , because most of these things far the Government , not for

t he consuming public , are bCJU8b.t through tbe procurement of tbe GoTerl)o

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fM7-.l -- 80

424

When will Mr. Nelson be heret .. MR. McREYNOLDS 1 'l\leada7 morning,

'nlere will be IIII!.JIY· occasions tor the differ ent millibars ot the

CCXIIIII1ssion t o con.ault each ~her individually. We would waste lots at

time by having the Ccmnission meet too often. We don ' t want t(X)~

occasions tor that. , MR. STETTINIUS: Once a week.

'IHE PRE3IDENT: Yes. '!hen I thought. in the beginning, when we are getting

the lining up ot the different fields ot work, it you could come in

• here about once a week for the first few weeks until the thing gets

going,

L!R. STETl'INIUS: . Yes.

THE PRESIDENT: I did not appoint anybody chairman. I think it i s entirely

up t o you . You can have a chairman or you can have lf.ac call the meetirig

order, call it together informally, or you oan have a chairman. I

don ' t care. . ,

L!R. STE'l'l'INIUS: Well; tl.ac is pretty good.

MR. McREYNOLDS: How many members will be here this afternoon? I suggest

we meet over in t he State Department. I have a room next to nt:f room,

Room 234. It we could meet at three or halt paet?

MR. STh'l'l'Ih"'US: Room 234 , State Department, a t 3 . 30?

MR. MoREYNOI.IX3: Yes.

'IHE PRESID:ENT: Fine. That is pretty good. I think you have got things go-

ing •

(The Conference concluded a t 1 . 16 P. M.)

• 425

CCIU'IDilll'.IAL Pre11 OoDterenoe 164.8, Exeou'Un otticN ot the White Houae, May 30, 1940, 1.~ P. M.

~ A rather poor h~liday.

'lHE FRJ!STD1!21T: Oh, yes; tar all ot us.

YR. DONAlDSON: All in.

~ FRESIDENT: I have been talld.!l8 stead1ly tor an hour and a hal1', so I

am a bit played out.

Firat, on the Con:t'erence itself, the scheme, the plan or opera-

tiona was completely outlined, the seven different 1eotions, and it ·

was made clear tha t all or the seven sections dovetail in together.

Actue.l.ly, I started at what might be called the lower end, because

it rela tes to the consumer and the public and on that end Ml.ss Elliott's

task Will be primarily that or watching consumer prices and watching

consumer supplies. 'Ihat is the first t a sk and we do not approach the

second until and unleee we have to come to it. In other -.rorde, con-

sumer prices today are all right; consumer supplies, goods on hand,

are all r~ght a m we hope to maintain t hem both on the price level e.xd

on the supply level so that there will be no inconvenience to the

public ar a rise in the cost ot living. So !dl.ss Elliott 's work will

be primarily that or _!etting up a Bme.l.l organization in conjunction

with the statistical departm.ents or the Gover%11118nt to watch 'lihose two

things.

'Ihe same wey, Leon Henderson' s organization will do the 8111118 thil:lg

' tor the basic raw materials. I used the illustration that he will

watch the course or prices from the mine through the smelter, through

·' the cost or transportation, to the prilDIU'J processil:lg factory. '!bat 1e

•

J

,

... ...

. . ,._ more ot a statistical job than aJIYthing else tor the time being.

'!ben, on transportation, Kr. Budd is setting up the IIIJDe killd at

machinery. 'Dle transportation taci llties are wholly adequde at the

present time but in case ot greater needs tor transportation tao111t1es,

Mr. Budd's job is SPing to be to make preparations to take care ot a

I!IJ.Ch larger tonnage moving, not Only On the railroads but elsO ruppi:n8,

general sh1pping, coastwise shipping, barge shipping on canals and in-••

land waterways, the Mississippi River and busses and trucks.

'Dlen we come to the Employment end. Mr. Hillman is not here be-

cause he has rather a bad case ot the flu; he is in bed but- he e:z;pscts

to be doWil here on Monday or '1\lesday. '!he Employment factor that he

handles ·relates to - - I think the easiest way, t6 describe it is all

noncombatant employment needs. In other words, he will take up all

those things where Secretary Hopkins has brought the coordination ot

the program during the past three weeks -- the civilian base pilot

training, the use af NYA vocational training, to turn out mechanics and

radio people, et cetera and so on, and the same kind of work that we

t hink will be extended to the CCC Camps -- noncombatant jobs -- cooks

we talked about that the other day -- radio people, automobile mechanics.

I do not mean autOIJX)bile mechanics to go into the automobile plants but r

to do the repair work around the country for all kinds of automotive

equipment.

Then, finally, agriculture -- Chester Davis probably has very 11 ttle

work to do except to set up a very small organization to keep. in touch

with agricultural supplies and agricultural prices, to see that we do

not run into a jam or a shortage in any one of those things e.nd to see

to 1 t that we maintain, with t he help. of the Depart.ment ot Agriculture,

the effort to keep agricultural prices up as close to t he object of

/ '

l6f8 - ~ 427

pari t,- ae n oan. In other warda , to amintain nat 1• DOt a party pro-

gram in IIJIT IIID.It but bas 'teen the national program adapt ed by both

parties tor 1D8J1Y years -- the objeoti ve ot parity.

Than you oome to the last two , the industrial 1118ter1als that Ml'. . ,:'\ . . .

Stettinius bandles 8Dd the industrial products that Mr. Knudsen handles. . . . . They aH all set to f!P • : They are me'et1118 this afternoon 1D Mao 1 a

.-ottiee - McReynold ' s office -- over in the State, War and NayY Build-

ill8, and he has already mde provision for ~ices - - whether it will

be for all of the seven sections or not I d not know - - over in the

Federal Reserve Bu.ilding, which is very handy to the Navy Department .

Buildill8 am the Mm1 tions or War Department Buildill8• It means you

....will have to walk a little fUrther than you have been accustomed to

walking when you go down :there, but it is a good han.dt place. The Fed-

eral Reserve has come through in fine shape and has given us a lot ot

space they do not have to use.

They will meet w1 th me again early nert week and they are all

"rarin' to go" and that is about the only thing that it. is necessary to

say. The only thing - -

(At this point Mr. Early interposed and said to the Presiden~: "I think the . J illustration between Budd and Pelley, as appli ed to the whole, was a .. good illustration.")

'lEE PIDSID~ Didn't I use that the other da;r?

MR. EARLY: Not to the Press.

THE PRESIDENT: I used this illustration about how the thing is working out:

In the arrangemeRt I made last summer, in September, largely on rec~

mendation of Mr. Dan Willard, who had run the railroads· for the GoTern-

ment during the war, when the railroads were under complete GovsrDment

management , he and I agreed that we wanted to avoid 1n every way possible ..

. • '

the Qcwel mt taJd.JlC onr the ~al~1 apln, u4 that WW') Nilrolll

prealdut la18W - - t hi8 waa hi s ~~~guUon - that 1t the Qcw11"211111Dt

had to t akle onr the railroads 118ain i n order to make thi ngs mon, on

the doctr ine ot chances it was a hundred t o one that t he railroad

OCIIiPanies would never get the r ailroads back the next t11118. BYI!l'J' r ail-

road president knows that when t he Government want s t o avoid that tram

happening. Theref ore, to put it -- not 11 tere.l.ly but I woul d 1!187 as a

1118taphor (?) -- the idea on t r ansportation is that we would have a

• doubl e desk with Mr. Budd, repr esenti ng the Government , on one s i de.

To Mr. Budd would colll8 from Mr. Stettinius, let us say;, a d_elll9.lld , a

call for X number o~ freight cars to haul or~ f~m the Mesabi Range to

the Illinois plants, steel plants , or ships to carry that ore from the

Range to the steel plants • .

And , when t he steel was to be moved through the final. processes of . .

the machine tool people, again !.lr. Stettinius • organization would ' tell

Mr. Budd where this steel was that had to be moved, what the tonnage was ,

and what the date was.

Then Mr. Budd ?tould -- oh, yes, Mr. Budd would then take those

movements of freight and pass them across the desk to the railroad repre-

sentative, John Pelley. He would be on the other side ot the desk, but

he would be representing t he railroads; Llr. Budd would be representing

the Government. Jir , Pelley would then olear with the r ailroads that

were involved. He would tell. them when the shipments had to be moved

and it would be up to the railroade themselves to see that they were

1 moved. And then, in case of any jam, such as we bad dur ing the World

War, the jamS wnich necessitat ed somethi ng being done to centrali ze

the operations, t he shipbuilding oompan;y involved in the jam that wasn't

I I . '

getting its shapes and plates on the day they needed them, they would

•

....... _ ..

. ...

I

. ·'

'

be the t1ret to IIIII:• a OQ11Pla1nt to llr. Budd. llr. Budd would haD! the

caupla1nt aoroee the desk to Mr. Pelley and it would be up to Mr.

Pelley to olear that jam through direct contaot w1 th the railroads in-

volved in the j !1111.

Well , now that is a pretty good illustration of how this whole

thing 1a going to work.

Q. Mr. President, cwld you give us a silllilar illustration which would illus-

t r a te the authority that Mr. Stettinius and Mr. Knudsen would have in

the pro due ti on field?.·

THE PRESIDENT: In the production field, for instance , as opposed to the

materials field, the first thing to ·do for Mr. Knudsen is to get speci-

f ically•.down on paper the first stage, which i s requirEments. Now, t hat G involves getting from. the ~end Navy the specificat ions, the types,

a decision on, say, automobile engines as to what types we are going to

order, whether it is possible for the Army to cut down from fourteen or

fifteen differ ent types of training plane engines to two or three types

of training plana engines, so as to standardize. And Mr . Knudsen's first

job will be to get his requirements listed down.

At t he same· time, through one of his assistants , on any g!. ven

article he knows where there is spare production capacity. He t hen

allocates -- oh, yes, wait a lllinute betore 'you come to that: He has

got his requirements and then he comes to hi s second_ stage, which is

scheduling so that all these things, they will be coJDing in, the .finished

products will be collling in, in the order which i s necessary for their

assembling. That means working out a system of priori ties which, ot

course, we did during the World War through pr actically a similar organi-

zation. That ' i s t he second stage, which is the scheduling of the pro-

duction. • And then, finally, the third stage, which is deliveries.

.. ' l

1648- e 430

We talked it over this morning and on that we all agreed on that

particular terminology tor those three steps of production, the require-

menta, the scheduling and the deliveries.

Q. Did Mr. Knudsen deti.nitely annov,nce that he would take a place on t_bis cam-

mittee?

'!HE PRESIDENT: That he would what?

Q. Has he definitely accepted a place on this committee?

'!HE ffiESIDl!NT: Oh, yes.

Q. I think a lot of peoplewant to know whether the Advisory Commissi"n --

that is the Colllll1ssion - - would have the same power and 811 thori ty as its

World War predecessor and whether these members will be responsible

directly to you as a practical mtter or whether they will have to clear

through a Cabinet intermediary?

'lHE PRESIDENT : No, no.

Q. \\'ill they report to you?

THE PRESIDENT: Oh, yes. Of course, remember they will have to live up to the

law. I will give you an illustration. Mr. Nelson, of Sears Roebuck , is

coming here on Tuesday as the head ot Procurement. or course there are

an enormous nWl)ber of articles which will continue to be handled through

the regular Government procurement services, just as they were during

.the World war. Well , take a simple illustration; I do not think we -need

to set up any additional mchinery for the p~hase of shoes. I think

Procurement is wholly capable of doing that. He will not have to set

up any new Government machinery to buy desk supplies, typewriters,

pencils, et cetera, and paper. That will be handled through Procurement.

In other words, a very large proportion ot Government purchases under

this program will be handled by the erts.ting agencies that handle it

day in and day out, and did during the World War. It is comparatively --

•·

#64S -' 431

_, 1D. poi~t ot the IIWIIber of articles, dur1Dg t he World War, the areat er -

oh, the OYerwhel.m1Dg percentage of them were handled through the regu-

l ar GoTerDIIlent agencies. 'lbere are certain things that have to b e put

i nto ~s production that are not in mass producti on at the present

time, which 110uld hot be hnndled through Procurement and , in 1110at of ~

those oases they have not be en handled through Procurement. They have

been handled directly by the ~ and NaVY•

Q Mr. President , I understand you are going to send a Message to Congress

tomorrow?

iRE PRESID:ENT: Yes ,

Q Will you say something on that?

iRE !'RESIDENT: I am sending up a t!essage to Congress tomorrow of three

lines, The first is the civilian training line which has been put to-

gether in the past three weeks by Harry Hopkins , actiDg as coordinator ,

and is DOW ready to turn over to Sidney Hillmen next week when he gets

here, I t hink I already sent in a deficiency estimate on that,

$32, 000,000.

Q How much is that? .. iRE PRESIDENT: $32,000,000.

I

Then, two other things which have come up, been coming to a head

now tor the past ten days, the additional appropriation for the~ and

Navy. The situation, as we all know, has very greatly changed since

two end

when we

a half weeks ago, two weeks ago last Sunday, I thrnk it) was ,

made the final determinations of what would be a sked of Congress

at that time, based on what the ~ and Navy thought were the Priori ty

I articles and enlargements that were necessary at that time. There

has been a very great change in the whole world situation and, because

of t hat, it is necessary t o send up , substantially, almost a doubling

'.

IMS- e 432

ot the prosram-

M.r guees ia -- I don't lc1ow that I will send 1UQ' definite tisuree.

I will probably send the Arm:! and Navy people up to the C<mnittee with

certain lists ot items and let the 001!1111 ttee detennine how IDI!.lcy' ot them

on the Priority I clasa should be included in either appropria t i ona or

authorizations to contract at this particular ti11111 -- in the next two

weeks.

Q. Mr. President, does that mean that you will have a larger initial expen­

diture tor Government orders than contemplated heretofore?

'.mE PRESIDENTi Yes, it !DlanB spending a lot or money for the actual ordering

of tanks and !!)l.ns, antiaircraft guns, guns to go in airplanes , and a

much larger supply of fixed emm•n1tion and an additional supply of

powder over what we had put. down two weeks and a halt ago.

Q. A:try airplanes?

THE PRESIDENT: And additional airplanes.

Q. V/hen you say substantially a doubling of the program, you mean a doubling

of the Message program?

'IKE P:RESID:ENT: Yes. I think you can make a guess that it will be another

billion dollars and it might be -- it depems a 11 ttle bit on what the

committees on the Rill feel should properly go into this Priority I

class -- it might co11111 out a 11 ttle below a billion or it might go over

a billion.

Q. Betdre you leave t he Council will you discuss the nature-of-Miss Elliott ' s

work?

'mE PRESIDENT: I talked about that, didn't I?

Q. I am sorry.

Q. On that same question, rDB:J I ask one? Will this industrial control you

are setting up include price control? You have spoken of a ~ot of orders

,

1dlerner there ia production.

IM&- t

433

mE PR&m:tn': At the present time, no. 'Dlat is all JOU can lillY'• Aa I llaid

the other d~ at the Conference, and I believe I said i t in~ Message,

we W8llt to avoid the spiral of the World War. It cott on sells at SO or

35 cents, it upsets the entire a gricultural life of the South. It copper

sella at 28 or 30 cents, it upsets the entire industrial life of the

nation. If wheat goes to 2i dollars, it upsets the econ~ of ever,.

fam117 in the Un1 ted States. And 1t prices go up subtJtantial17 b97ond

the present price level - - I mean as a general thing, remembering al'W8111

~hat we still thi nk that the farmer is too tar below pari t7 - and that

is not a .partisan question because both parties are absolutel7, 100 per

cent, in accord on it-- it the general level or prices gets out ot

kilter in one engle, that is apt to get another angle out of kilter, and

that means, of course, that people who work tor wages or salaries , it

they s ee the cost of things that they have to have tor themselves 8.lld

their families going on up, they are going to ask tor more wages. And

when you get 100re wages , it means your oost of p~oduct1on goes up alld

you have to add something to the cost of material. It is the same old

vicious spiral and that is one thing we want to avoid .

We haven't got a t this time to eny question ot price :fixing because

the evil has not appeared. What we will do i f it does, I do no.t know.

Q. Just take the case ot girders: Suppose the Government wants to bu7 girders.

THE PRESIDENT: Girders?

Q. Steel girders.

Q. A big steel company can possibl7 sell those ordinarily at a cheaper pries

than the sma.ll steel companies because of mass production and could put

in a lower bi d . Let us say the big steel company is all tilled up w1 th

orders and your Colllll1ssion might decide there is plant capacit,. in a

·~·

I

li 164.8 - 10

434 limaller ooli!J)c;r, although the price is higher. Is the OoYel'lllllat r~

qu1red to take the lowest bid, or oan 1t , w1 thout .IUIT add1 tional leghla-

tion, go OTer and p~ a little more in order to get thoset

'IHE PRESIDl!NT: The question of paying a little more, yes, I suppos e we pro-

' bably would. But we would not p~ aey more until i t is def1n1 tely prOTed

that it was coating the little compaey actuall.T more to turn out the

orders than the big compaey. It always is not t rue. You take sane of

the steel companies a t the present time that in the past few years have

put in complete new tooling. Now, they are mc.h smaller companies than

u. s. Steel or Bethlehem, and because they happen to be newly tooled,

it is possible, though they are only a tenth or the si ze, t hat their coat

will be lower than the two big companies. In other words , each case has

to stand oil its mm mer!. ts.

Q In New York, Matthew Woll criticized Mr. Hillman' s appoint1111nt and raised

the question whether there \Vas any place ill the Administration for the

A. F. of L. ?

'lHE PRESIDENT: All I can say is, off the record, that I em not the least bit •

concerned. (Laughter)

Q That is off the recore?

THE PRESIDENT: Yes.

Q So far as Mi ss Nelson' s (the reporter evidently meant W.as ~iott) job - . i s concerned, will she have any control of forces at all f rom the con-

sumer ' s point of vievt, or will her sole control be from a r eportorial

standpoint, using public opinion?

'lHE PRESIDENT: I don • t know. As I say, that is one of the things we haven • t

got to yet. It is not a probl em to~.

Q Mr. President, in discussing the initial protective force with some of the

officers of the /lrrlff, they ind1 cated they do not belieTe the National

I ..

r J

1648 -

QQard is in ocmdi Uon to aot 111111ecl1atel7 in cue at 1111 emergen.CIJ', llD4

that has, I belieYe, brought up. immediatelf the question ot whether the

Regular A:raq will be increased. Ie that

'IHE PRESIDENTs (interposing) I don't 'know; I have not talked about that. I

could not tell you.

Q. Wi th refere.nce to the visi t of Mr. Martin of the New York Stook EJ:change

this morning, was there a.u:y discussion ot the probab1lit7 of closing of

the Stock EJ:change, or Government control of prices there?

mE FRESIDENT:· No. Well , there was and there wasn't. I told him that I was

a great deal older than he was an~ the first panic I saw was in 1907,

just after I started in to practice law for the firm that was counsel of

the Stock Exchange, Carter, Ledyard and Milburn, and I have been thrG,Ilgh

a lot of panics since -- 1914, when the war broke out; 1921 , had a pretty

bad time; 1929 and 1933, when all the banks were closed and, of cours e,

we had to close all the e.xchanges because there v;ere no banking facili tie

and then Stock Exchange panics because I had been through so l'D!lcey of

them, that always led me to discount the danger to the Nation. 'llley al-

ways JIIS.Il88e to work out some way and somehow. Alld we agreed that there

are two things that people of this generation who had not had all that ,

e:JCPerience should remember in case of Stock Exchange trmbles : 'llle first

was to keep your feet on the ground, and the second was to keep your

mouth shut . And we do not think it is a problem; we do not think it is

a problem..

Q. Is Mr. Martin alarmed over the s1 tuation?

'IHE PRESIDENI' : No, no.

Q. Mr. President , the way you outlin.ed the fUnctions of' this Council, these

gentlemen and lady, it smnds very much like a completely voluntary

matter and , yet, it is set up under a statute, was it not?

........

••

'l'BE PRBSIDEN'l': 011 1 no; i t i s DOt TOluMU'J:-

Q. Do they ban su thor1 ty?

THE PRESIDJ!Nr: I n effect.

I MEI -- l2

436

Q. The law g1 ves them that? You would not have to ask t or e.ey more?

THE PRESI DJ!Nr: No.

Q. Mr. PresidEI!lt, was the absence of Secr etary Perkins from this mor ning ' s

Conference significant , in view of the tact you stated that the basi c

Council did include labor?

THE PRESIDENT: She i s away and Sidney Hil .lJnan !las the flu, otherwise he would .. have been here,

Q. Will you mention the third thing in connection With your Message tomorrow?

you mentioned civilian appropriations?

'IRE PRESIDENT: A:J:my and Navy,

Q. '!hose are the other two.

Q, Would you care t o comment on the tax program?

THE PRESIDENT: I bave not heard a word since yesterday, It seems t "o b&-go-

ing along. They are hav ing another meeting this morning.

Q. This extra billion, is it likely to cause any change in the tax program?

THE PRESIDENT: I do not think so, no. You have got to remember this: A

program that started at two billion and then goes to three and then to

four -- I am us ins rough figures -- a "v ery large part of 11. program of

that size won 1 t have to be paid for -- I mean out of the Treasury --

until either late next spring, long after Congress meets, or even in

the following tiscal year , so I do not think it need affect the present

tax program they have got on the Hill .

Q. Mr. President , a trEillSndous thing ~n here is t his tralning ot civilian

youngsters. I s the country and the Government supplied with the neces-

sary money and facilities right now tor that training?

;,

IMS- ll5

437 'IRE PRE3IDENT: I th1nlc so.

Q. How 1!18J1Y 111811, do you think, sir, will be needed to train those?

'lBE PRmiDENT: I do not know; I cannot give you figures. All I can point

out is that we are going to expand that portion of the worK at NYA; we

are going to expand what CAA is doing from 10,000 to 50 ,000 and we are

going to put certain torms of noncombatant training into the CCC. That

is as far as we can go and I can•t tell you what will happen on the total

figures . As time goes on we mey have to increase that pr ogram.

Q. Does this new setup f i t into the White House structure under the reorgani-

zation program announced last fall?

THE PRESIDENT: Absolutely. I am going to have a couple more assistants down

here to keep me in touch with this so they can ac t as liaison people ,

legs, legs between me and the different sections and the Commission.

Q. JUSt two more?

'lBE PRESIDJ!NT: I think I will put in two more and I think I will leave the

sixth open tor any unforeseen emergencies.

Q. · Mr. President, have you any comment on Mr. Ford's statement that he could

produce a thousand plan.es a day in one plant?

THE PRESID)l:Nll' : No, I do not know enough about it .

Q. Mr. President, is it possible for you to say how soon these particular

programs will be completed? Can you make an estimate?

'lBE PRESIDENT: ....I.Ql1 mean fully running?

Q. I mean with all the money spe'nt and the equipment obt.ained.

'lBE PRESIDENT: Oh, rrry, no.

Q. l'lhen is the dirt going to fly? When will these orders be put in? .-

THE PRE'SIDENT: Well, judging by the World War, we did not get into full

operation -- of course it was. a llDlch larger program, you have got ~o •

remember that we were organizing an ,'lrrrfy at between four to five million

•

f64,8- 1' 438

-n lllld tbe equipment tor the whole thing, and the Na.,- 500,000 -n

iutead of 80,000 8lld it waa on an intini taly larger scale. We did not

get into full production until about May, 1918, about a year and, a

month attar the thing waa started,

I cannot tall, but I should sey offhand that we are going to beat

that, more than cut it in halt,

q, Si x months?

Q. Rave you, sir, an estimate of the amount of actual cash money that will

be needed by the first of January, for instance?

'lEE PRESIDENT: I could not tell you, Fred (Mr. Essary) . There are too man:r --

I should say not an awfUl lot by the first of January - ­

Q. (interpoSing) Will the tax gentlemen in Congress --

'IHE PP..ESIDENT (interposing): I mean_payment out of the Treasury, There will

be an awful lot of money obligated but actual checks going out of th.e

Treasury, not so much before the first o:f January .

MR. GODWIN: Thank you, Mr. President ,

'